Drought-related food inflation bad but not disaster

'People are going to be making tradeoffs in the grocery store but it won't show up in the CPI'

Published: 08/15/2012 at 11:00 PM

(CNBC) Consumer inflation should show just a tiny pickup in July, even as the Midwest drought raises the prospect of food inflation in months to come.

Economists expect to see an increase of 0.2 percent in the Consumer Price Index, for both headline and core, excluding food and energy. CPI is released Wednesday at 8:30 a.m. ET. In June, consumer prices were flat and the year-over-year change was 1.7 percent.

“It will take a while to feel the full effect,” said Diane Swonk, chief economist at Mesirow Financial. “It’s coming, and it’s going to be in dairy products, eggs, meat, and people are going to be making tradeoffs in the grocery store but it won’t show up in the CPI.”